Question #3: What Insurance Coverage Does the Lease Require Tenants to Purchase?
Few business owners new to commercial leasing will look beyond their actual monthly rent and utility costs when determining if a space is affordable, but you also need to consider your insurance costs.
Moving from a home-based business into "brick and mortar" space will cost you more to insure your business because in addition to your own insurance needs, your landlord will probably require you to purchase insurance to protect him/her as well. As long as you occupy the space, you will have to have insurance coverage - it becomes a fixed expense along with your other rent expenses.
How Much and What Type of Insurance Will You Need? Be absolutely sure to ask what type and amount of insurance coverage is required by the lease. This may seem like an unnecessary question, but many small businesses are uninsured or underinsured.
GCL insurance offers the landlord protection from being sued under certain situations and this should be spelled out very clearly in your lease. While GCL offers you some protection, the landlord requires it to protect their own interest, not yours.
Some landlords require insurance coverage that may be expensive, or worse, coverage that you cannot get. While most businesses can get GCL insurance, if a landlord requires product liability insurance, some businesses may have trouble finding coverage, or coverage could add thousands of dollars to your insurance bill.
Is Insurance Required Prior to Moving in? You should also know in advance if the coverage must be in place before you can move in. Most landlords will require that you have a minimum (that they set) of general commercial liability (GCL) insurance prior to handing you keys to the space.